.svg)
What to do when you don't have a credit score
The average credit score is 703 in the U.S., according to Experian. If you don’t know your credit score, you may not know how you compare to the average. You may also not know why it’s important to improve your score. In this article, we provide tips for how you can learn your score and what to do if you don’t have one yet.
How to check if you have a credit score
One way to know if you have a score is to use one of the available credit score services, such as Credit Sesame, Credit Karma, or Mint, to see where you rank. If you’ve opened a loan account with a bank or credit card company more than six months ago, you should have a score. You can also check your free credit history each year at AnnualCreditReport.com to see what credit activity you’ve participated in that would also contribute to this score.
Why you don’t have a credit score
There’s no such thing as a zero score. Having “no score” simply means you don’t have any number tied to your credit profile. You can be absent from the scoring model if you’ve never had a credit card or loan, or if you haven’t used credit in a long time. It’s also possible that your new line of credit hasn’t been reported yet.
What you need to know if you have no credit score
So, you’ve checked your credit, only to learn that you don’t have a score. Now what? There are some essential facts to keep in mind as you work toward establishing credit.
You may still have credit reports
A lack of a score doesn't always mean you have a complete lack of credit history. Equifax, Experian, and TransUnion each track things a bit differently, but one or all could have data on you. It's also possible that your credit report will show activity that's too old to be counted in a credit score or too recent to show up. Scores generally only count the past two years in their scoring model.
You may have no credit scores even if you have open accounts
If your open accounts are old and you haven’t used them in the past two years, you could have no score. This is true for accounts that you have closed, or accounts that don’t report to the credit agencies. One way to make sure your data is contributing to a score is to reopen old accounts or only do business with lenders that report to the three major credit bureaus.
You have fewer options for credit
While you can still access some forms of credit without a credit score, it’s very difficult to do so. Plus, it’s likely that you’ll be shut out of some of the better credit options. Yes, it’s true that you need credit to get credit. So, what should those without a credit score do? Consider some of the other credit-building activities listed later in this article.
Having no credit score doesn’t mean you have bad credit
A lack of credit score doesn’t tell lenders that you can’t handle credit. It’s more an indication that you haven’t proven yourself yet. As soon as you start participating in credit-building activities, you can quickly see your score appear—and improve, if done responsibly. It's sometimes much easier to build a credit score from scratch than it is to fix a weaker one.
It can take time to build a credit score
Opening a new credit account may not show up on your credit score for six months, or even longer. You must be patient when expecting a score from nothing. This also proves why it’s important to stop delaying credit activities. The sooner you act, the sooner you’ll see a score.
Why do your credit history and score matter?
Banks stay in business by issuing credit to people who are responsible enough to pay it back. Without an intimate knowledge of how you spend your money, a credit score and credit history are the next best thing. They give the lender an idea of the risk they are taking when they lend to you. Then, they can approve or deny your application based on that risk.
Credit histories and scores are also important for other areas of your life, such as applying for car insurance or getting jobs in the financial sector. Landlords may also require you to have a suitable credit score before they rent to you.
What should you do if you have no credit?
The number one thing to do if you lack a credit score is to start building one. These steps are available for those who are just starting out.
1. Become an authorized user
If a spouse or family member can add you as an authorized user on a card, you have an opportunity to start building credit. Keep in mind that as an authorized user you won’t be solely responsible for paying the bill, so make sure to coordinate accordingly.
Also, others may be reluctant to add you if you have a history of questionable money mistakes. In that case, see if you can be added as an authorized user but not actually get the physical card to spend on. This move can also affect your score negatively if the person fails to pay a bill, so partner up with someone who is money smart.
2. Get a co-signer
Another option for getting a loan is to use a co-signer. This individual will put their name on the loan as a guarantee that, if you fail to make payments, they would be held liable. This is another situation where it pays to have a trusting relationship with someone who has good credit and who trusts you to make payments on time each month.
3. Apply for a secured credit card
If you have cash available, you could be approved for a secured credit card. These cards can be used just like your typical credit card, but they only allow you to charge up to the credit line equal to a cash deposit put down in advance.
If you put down $500 in cash deposits, for example, you’ll have $500 to spend with that card. Prompt repayment of the card bill will soon have you building that much-needed credit score.
4. Diversify your debt
Your credit score is based on several factors, one of them being your credit mix. Credit mix is a term that describes the types of credit you use. Student loans, car loans, or mortgages are considered installment credit. Credit cards or bank lines of credit are considered revolving credit. Having a little of each is the best way to keep your score healthy.
